Financial Reporting Fluctuation (“Flux”) Analysis

(1)

Financial Reporting

Fluctuation (“Flux”) Analysis

NOAA’s Finance Office

(2)

What is required?

NOAA Line/Staff Offices (L/SOs) need to provide

explanations of changes in activity that resulted in

material changes to financial statements and footnotes,

including:

•

_{Program/operating expenses}

•

_Outlays

•

_{Obligations (direct vs. reimbursable)}

•

_{Undelivered orders}

•

_{Reimbursable activity}

•

_{Stewardship data}

(3)

What is material?

NOAA is required to explain fluctuations in excess of

10% or $12M (per DOC/OFM).

– _NOTE:_{DOC/OFM reserves the right to request}

(4)

Where to start?

Most fluctuation analysis begins with the Standard

General Ledger (SGL) account, the Financial Statement

line item, and/or the footnotes.

(5)

Financial Statement/Footnote

Fluctuations and SGL Accounting

•

Explain material changes in

program/operating

expenses

– _{USSGL Account 6100} – _{Statement of Net Cost}

•

Explain material changes in

outlays

– _{USSGL Accounts included:}

• _{4802 (E-B) and 4882 (E)} • _{4902 (E) and 4982 (E)}

– _{Statement of Budgetary Resources (SBR) and SF 133}

(6)

Fluctuations & SGL Accounting (cont.)

•

Explain material changes in

obligations (Direct vs.

Reimbursable)

• _{4801, 4881, 4831, 4802, 4882, 4832 (All are E-B) *No PY} downwards

• _{4901, 4981, 4931, 4902, 4982 (All are E-B) *No PY downwards}

Report on Budget Execution and Budgetary Resources

•

Explain material changes in

undelivered orders

• _{4801, 4881, 4831, 4871, 4802, 4882, 4832, 4872 (All are E-B)}

Report on Budget Execution and Budgetary Resources

(7)

What Can Cause Fluctuations?

•

Examples of events that can cause fluctuations:

– _{Changes in the appropriation (impact on obligation,}

expense, and/or outlay flux)

– _{Increased capitalized property (impact on 6100 flux)}

– _{Increase of items accrued in one year and outlayed in the}

next (impact on outlay flux)

– _{Increase in current year UDOs expended in following year}

(8)

Fluctuation Explanations

•

Explanations should EXPLAIN WHY the variance exists

and not simply identify WHAT components make up

the difference.

•

Explanations should make sense to individuals

outside of NOAA and DOC. Do not use acronyms.

•

Please note that all three of the following elements

must be addressed when writing each line item flux

explanation:

– _{1) What caused the change;}

(9)

Fluctuation Explanations (cont.)

•

A breakdown of the “total amount change” must be

explained. For example, if the total amount change

is $5 million, a breakdown should be explained as

follows:

– _{An increase of $3 million was due to…} – _{A decrease of $2 million was due to…}

(10)

Example – Outlay Fluctuation

Outlay fluctuation on the SBR:

For FYx7 Qtr 2, NOAA had a decrease of ($287,198)

million in outlays, when compared to FYx6 Qtr 2.

(11)

Example – Outlay (cont.)

•

Explanation that “needs work” (in Millions):

– _{There was a decrease of $8,000 that can be attributed to}

the fact that NOAA received a decrease in appropriations in FYx7, when compared to FYx6. As a result, there was a

decrease in outlays.

•

Good Explanation (in Millions):

– _{There was a decrease of $8,000 for the Suitland Facility.}

The decrease is due to the completion of the NOAA

Satellite Operations Facility (NSOF) construction contract in the 2nd Qtr of FY 2xx6 which resulted in GSA billing the

Reimbursable Work Authorizations funded by NOAA, for costs disbursed. Further, the activities on contracts

(12)

Example – Required Supplementary

Information Fluctuation

The DOC/OFM requested that NOAA explain a change

in a performance goal for Research and Development

Investments.

(13)

Example – Required Supplementary

Information (cont.)

•

Explanation that “needs work”:

– _{$29.3M in costs associated previously with weather and}

water research during FY x6 have now been transferred into weather and water development costs during FY x7.

•

Good explanation:

– _{The increase in costs between FY x6 and FY x7 of $29.3M in}

weather and water is attributed to an increase of $40M for the National Weather Services’ Automated Surface

Observing System (ASOS). Funds were obligated during the 4th_{quarter of FY x6 with minimal costs being incurred during}

that timeframe. A decrease in costs of $10M was as result of the completion of the National Weather Services’

(14)

Additional Resources

• _{OMB Circular A-136 Financial Reporting Requirements:}

http://www.whitehouse.gov/omb/circulars/a136/a136_revised_2006.pdf

• _{DOC Performance and Accountability Report (PAR)}

http://www.osec.doc.gov/bmi/budget/FY07PAR.htm

• _{NOAA System Closing Dates}

http://www.corporateservices.noaa.gov/%7Ecbs/glinfo.htm

• USSGL

http://fms.treas.gov/ussgl/index.html

• _{Financial Statements Branch}

Mark P. Miller, Branch Chief, 301-444-2704, [email protected]

(15)

Supplemental Information

•

SGL

•

Budgetary vs. Proprietary Accounting

•

Obligations vs. Expenses

•

Fluctuation Analyses:

– _{Fluctuation Analysis for SGL Account 6100 – Program and}

Operating Expenses

– _{Fluctuation Analysis for Outlays}

– _{Fluctuation Analysis for Obligations}

(16)

United States Standard General

Ledger (USSGL)

•

Federal Financial Management Improvement Act of 1996

(FFMIA) – required to implement and maintain financial

management systems that comply with the USSGL at the

transaction level.

•

Provides a uniform Chart of Accounts and technical

guidance to be used in standardizing federal agency

accounting.

– _{The USSGL Supplement (released annually) is composed of five}

major sections:

• _{Chart of Accounts} • Account Descriptions • _{Accounting Transactions} • _{USSGL Attributes}

• Report Crosswalks

(17)

USSGL (cont.)

•

Includes both Proprietary and Budgetary Accounts

that are self-balancing (total debits = total credits).

– _{TWO sets of books:}

• Proprietary – traditional accounting classifications (assets, liabilities, revenues and expenses)

• _{Budgetary – accounts to track resources and execution of federal} funds

•

NOAA is required to use USSGL’s standard report

(18)

USSGL (cont.)

1010 Fund Balance with Treasury 11xx/12xx Cash

13xx Receivables

1410 Advances and Prepayments

15xx Inventory; Seized, Forfeited and Foreclosed Property; Commodities: Stockpile Materials

16xx Investments

17xx-18xx General Property, Plant and Equipment (1720 CWIP) 19xx Other Assets

21xx Accrued Liabilities – Other

22xx Accrued Liabilities – Payroll and Benefits 23xx-24xx Unearned Revenue

25xx Debt

26xx Actuarial Liabilities 29xx Other Liabilities 3xxx Net Position

(19)

USSGL (cont.)

4xxx Budgetary

4450 Unapportioned Authority

4610 Allotments – Realized Resources

4700 Commitments

48XX Undelivered Orders, includes upward and downward adjustments of prior year Undelivered Orders

(20)

USSGL (cont.)

NON-CASH UDOs

4801 Undelivered Orders - Obligations, Unpaid

4831 Undelivered Orders - Obligations Transferred, Unpaid

4871 Downward Adjustments of Prior-Year Unpaid Undelivered Orders - Obligations, Recoveries 4881 Upward Adjustments of Prior-Year Undelivered Orders - Obligations, Unpaid

CASH UDOs

4802 Undelivered Orders - Obligations, Prepaid/Advanced

4832 Undelivered Orders - Obligations Transferred, Prepaid/Advanced

4872 Downward Adjustments of Prior-Year Prepaid/Advanced Undelivered Orders - Obligations, Refunds Collected

4882 Upward Adjustments of Prior-Year Undelivered Orders – Obligations, Prepaid/Advanced

NON-CASH DOs

4901 Delivered Orders - Obligations, Unpaid

4931 Delivered Orders - Obligations Transferred, Unpaid

4971 Downward Adjustments of Prior-Year Unpaid Delivered Orders - Obligations, Recoveries 4981 Upward Adjustments of Prior-Year Delivered Orders - Obligations, Unpaid

CASH DOs

4902 Delivered Orders - Obligations, Paid

4972 Downward Adjustments of Prior-Year Paid Delivered Orders - Obligations, refunds Collected 4982 Upward Adjustments of Prior-Year Delivered Orders - Obligations, Paid

(21)

USSGL (cont.)

5xxx 6xxx 6100 7xxx

8xxx

Revenue & Other Financing Sources Expenses

(22)

The Difference Between Budgetary and

Proprietary Accounting

•

DOC’s financial statements reflect both proprietary

and budgetary accounting transactions.

•

Under the proprietary accrual method of accounting,

revenues are recognized when earned; expenses and

property capitalizations are recognized when

incurred, without regard to the receipt or payment of

cash.

•

The proprietary accrual basis of accounting provides

a matching of costs to the production of goods and

services.

(23)

Budgetary and Proprietary

Accounting (cont.)

•

Budgetary accounting was designed to recognize the

obligation of funds according to legal requirements,

which, in many cases, is made prior to the

occurrence of an proprietary accrual-based

transaction.

•

Budgetary accounting is essential for compliance

(24)

The Difference Between

Obligations and Expenses

Budgetary Accounting

+ Change in Undelivered Orders (48XX) + Change in Unpaid Delivered Orders

(Accruals) (49X1)

+ Change in Paid Delivered Orders (Disbursements) (49X2)

= **CY Obligations**

Proprietary Accounting

- Change in Capitalized Property (17XX/18XX)

+ Change in Accruals (2XXX) + Disbursements (1010)

= **CY Expenses** (6XXX/7XXX)

24

NOTE #1 – CY Obligations ties to SF 133, Line 8

NOTE #2 – Not all obligations are expenses. For example:

(25)

Fluctuation Analysis for SGL Account

6100 – Program and Operating

Expenses

•

USSGL account 6100 –

Program and Operating

Expenses

fluctuation analysis (proprietary activities)

– _{Does not compare to the Outlays, Obligations or}

Undelivered Orders fluctuation analyses (budgetary

activities) because different USSGL accounts are used in each of these fluctuation analyses.

•

The MARS query provides a comparison of current

and prior year USSGL account 6100 balances broken

out by object class, program codes and FCFY. L/SOs

must use the query results provided by the 6100

Expense query for this fluctuation analysis.

– _{Other queries used by L/SOs could include accounts with}

activity not part of the USSGL account 6100. Additionally, queries that contain or do not contain budgetary or

(26)

6100 – Program and

Operating Expenses (cont).

Brief summary of what the 6100 Flux should

include/exclude:

• _{Includes current fiscal year (FY) change in 49X1 Unpaid}

Expenditures

• _{Includes current FY 49X2 Paid Expenditures}

• _{Excludes current FY change in 17XX and 18XX capitalized}

property transactions, including 1720 CWIP transactions

• _{Excludes current FY interest expenses (63XX accounts) and}

employer benefit contributions (64XX)

• _{Excludes all undelivered orders (48XX accounts)}

(27)

Fluctuation Analysis for Outlays

•

The Outlays fluctuation analysis is based on the outlays

line item on the Statement of Budgetary Resources,

which is populated by USSGL accounts 49X2 and 48X2

(budgetary cash paid activities)

– _{Does not compare to the USSGL account 6100 fluctuation analysis} (proprietary activities) or the Obligations fluctuation analysis

(budgetary activities) requests because different USSGL accounts are used in each of these fluctuation analyses.

•

A CBS query provides a comparison of current & prior

year USSGL accounts 49X2 – Expended Obligations Paid

and the change in USSGL accounts 48X2 – Paid

Undelivered Orders broken out by object class, program

codes & FCFY. LOs must use the query results provided

by the Outlays query for this fluctuation analysis.

– _{Other queries used by LOs could include accounts with activity not} part of the Outlays financial statement line item. Additionally, queries that contain or do not contain budgetary or proprietary accounts

(28)

Outlays (cont.)

Brief summary of what the Outlays Flux would

include/exclude:

•_{Includes current FY change in}

– _{48X2 Paid Undelivered Orders; does not include downward PY recovery}

accounts

– _{Includes current FY change in 17XX and 18XX capitalized property}

transactions (including 1720 CWIP transactions), paid transactions only

•_{Includes current FY 49X2 Paid Expenditures; does not include}

downward PY recovery accounts

•_{Includes current FY 6XXX expenses, paid transactions only} •_{Excludes current FY change in 49X1 Unpaid Expenditures} •_{Excludes 48X1 Unpaid Undelivered Orders & 49X1 Unpaid}

Expenditures

(29)

Fluctuation Analysis for Obligations

• _{An Obligations fluctuation analysis is currently being developed based on} the “obligations incurred” line item on the Statement of Budgetary

Resources, which is populated by USSGL accounts 49XX and 48XX (budgetary activities)

– _{Does not compare to the USSGL account 6100 fluctuation analysis (proprietary}

activities) or the Outlays fluctuation analysis (budgetary cash paid activities) requests because different USSGL accounts are used in each of these

fluctuation analyses.

• A CBS query provides a comparison of current & prior year changes in USSGL accounts 49X2 – Expended Obligations Paid and the Change in 48X1 – Unpaid Undelivered Orders, 48X2 – Paid Undelivered Orders and 49X1 – Unpaid Expenditures broken out by object class, program codes & FCFY. LOs must use the query results provided by the Obligations query for this fluctuation analysis.

– _{Other queries used by LOs could include accounts with activity not part of the}

(30)

Fluctuation Analysis for Obligations

Brief summary of what the Obligations Flux would

include/exclude:

•

Includes current FY change in 48X1 Unpaid Undelivered Orders & 48X2 Paid Undelivered Orders

• _{Does not include downward PY recovery accounts}

•

_{Includes current FY change in 49X1 Unpaid Expenditures &} 49X2 Paid Expenditures

• _{Does not include downward PY recovery accounts}

•

_{Includes current FY change in 17XX and 18XX capitalized} property transactions, including 1720 CWIP transactions, except PY recovery amounts

•

Includes current FY 6XXX expenses

(31)

Fluctuation Analysis for Undelivered

Orders

• _{An Undelivered Orders fluctuation analysis is currently being developed} based on the Statement of Budgetary Resources, which is populated by USSGL accounts 48XX (budgetary undelivered activities)

– _{Does not compare to the USSGL account 6100 fluctuation analysis (proprietary}

activities), the Outlays fluctuation analysis (budgetary cash paid activities) or the Obligations fluctuation analysis (budgetary expended and unexpended activities – cash paid and accrued) requests because different or only part USSGL accounts are used in each of these fluctuation analyses.

• _{A CBS query provides a comparison of current & prior year changes in} USSGL accounts 48XX – Undelivered Orders balances broken out by object class, program codes & FCFY. LOs must use the query results provided by the Undelivered Orders query for this fluctuation analysis.

– _{Other queries used by LOs could include accounts with activity not part of the}

(32)

Fluctuation Analysis for Undelivered

Orders

Brief summary of what the Undelivered Orders Flux

would include/exclude:

•

Includes current FY change in 48X1 Unpaid

Undelivered Orders & 48X2 Paid Undelivered Orders

• _{Includes downward PY recovery accounts}

•

Excludes current FY change in 49X1 Unpaid

Expenditures & 49X2 Paid Expenditures

•

Excludes current FY change in 17XX and 18XX

capitalized property transactions, including 1720

CWIP transactions

•

Excludes current FY 6XXX expenses